Consider the Following Statements About Service Department Costs

question 5

Multiple Choice

Consider the following statements about service department costs:
I. The costs of the Human Resources Department in a manufacturing organization must be allocated to production departments in order to achieve a correct costing of inventory.
II. The allocation of service department costs requires that an organization select both an allocation base and an allocation method.
III. Service department cost allocations are more relevant for firms involved in service industries (e.g., repair, health care) than for those involved with manufacturing.
Which of the above statements is (are) correct?

• A) I only.
• B) II only.
• C) I and II.
• D) II and III.
• E) I, II, and III.

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